City: Land Grab

“That’s the biggest crankshaft grinder in North America,” says Johnny Bianchi with a smile on his boyish face, pointing to a piece of machinery resembling a lathe. B&G Machine, Inc., which Bianchi co-owns with his father and younger brother, remanufactures large diesel engines and components, shipping them to five continents. Like many Seattle-based manufacturing and industrial companies, the business has used the city’s transportation nexus of rails, roads and sea lanes to fill a niche market on a global scale.

 

“I can get a 40-foot container to Dubai [holding eight engine blocks] for about $3,000,” says Bianchi, or an engine block to Spokane for $300.

 

Located in Seattle’s Georgetown neighborhood, B&G Machine is one of many companies concerned about increasing pressure to convert the city’s industrial land to commercial and retail uses, due to the rising cost of land, real estate speculation and gentrification.

 

The Seattle City Council responded to these concerns in December, passing controversial legislation that restricts non-industrial uses permitted on Seattle’s 5,142 acres of industrial land (12 percent of all land in the city). The council, in a 6-3 vote, changed zoning to significantly reduce the size of office and retail structures allowed in industrial zones, from 100,000 square feet to 25,000 square feet and 10,000 in some areas.

The legislation–promoted by then-City Councilman Peter Steinbrueck (whose term ended in December)—was supported by industrial and manufacturing businesses, and opposed by a coalition of landowners, real estate developers and retailers.

 

For many of those involved, including Steinbrueck, the legislation is just a starting point; it includes a companion measure that requires various city departments to report back to the council over the coming year on related issues such as freight mobility and industrial zone boundaries. The council will likely pursue additional legislation based on the findings.

 

There’s plenty of evidence that commercial and retail users—who typically have bigger profit margins than industrial users—are moving to cheaper industrial land. In Ballard, a complex (between 14th and 15th Avenue NW and 46th Street and Ballard Way), that includes a Trader Joe’s, a fitness gym, a third retail space and parking for more than 400 cars is being built on industrial land. This development, Ballard Blocks, complied with the old restrictions for non-industrial uses. Such regulations were written originally to prevent large box stores, such as Costco, from taking over industrial lands.

Back at B&G Machine, in a squat concrete building the size of a small airplane hangar, Bianchi needs to look only a few blocks to the northeast to see the latest example of his changing neighborhood. Demolition of the red brick Rainier Cold Storage and Ice facility on Airport Way South began in January. The commercial real estate company, Sabey Corporation, purchased the 5.5-acre industrially-zoned site in October 2006, an dplans to develop it for mixed use, with around 100,000 square feet of retail and office space, according to Jim Harmon, a senior vice president with the company. Sabey Corporation applied for the necessary permits from the city well before the legislation passed and is not subject to the changes.

Industrial and manufacturing businesses have a lot of reason to like the site; it has 310,000 square feet of contiguous space, and easy rail and freeway access. But the existing buildings are unsafe and need to be demolished, according to Sabey Corporation and the city’s planning department.

“There is a certain demand from industrial users,” says Harmon. But the rent they are willing to pay is low compared with non-industrial users—too low to cover the cost of replacing the existing structures.

 

For many, such as Bianchi, who grew up six blocks from B&G Machine’s main facility, more than buildings are at stake. Industry and manufacturing businesses help provide Seattle with a diverse and sustainable economic base—and without these businesses, blue-collar middle-class jobs will be a thing of the past in the city, he says. Seattle’s manufacturing and industrial businesses and labor promoted this view last fall when they rallied behind the legislation.

“It was a huge win for the city,” says Dave Gering, director of the Manufacturing Industrial Council of Seattle (MIC). He expects future challenges though. “This issue will be in play forever… [The opposition] has too much money at stake.”

Those challenges may come from the Coalition for Wise Industrial Growth (CWIG), a group whose 130 members are primarily real estate developers and investors, or owners of industrial land property and retail shops located on industrial land. CWIG claims the new restrictions on non-industrial uses will stifle economic development. Given the high stakes involved, CWIG hired the Fearey Group, a Seattle public relations firm, to run a campaign against the legislation. The firm will also help organize CWIG’s efforts in any legislation resulting from city departments’  reports on related issues.

CWIG has intentionally stayed away from any questions about the vitality of Seattle’s industrial base. However, at the October public hearing, many of its members told the City Council that industry and manufacturing are already leaving Seattle.

“The person who’s going to put out the highest bid for land is going to make the best use of it,” said Vince DeLuca, senior vice president at the Seattle office of Colliers International, a real estate company. Well dressed and well spoken, DeLuca, with two decades of experience in Seattle’s industrial real estate market, has been one of CWIG’s most vocal members.

The December legislation is riddled with problems, he asserts, saying that it is based on skewed studies and will lower property values by millions of dollars. He also says it punishes companies, such as hi-tech research and development, which do not fit the traditional definition of industry. DeLuca sees it as a political move to win over organized labor and industrial business owners.

But there is a strong argument for keeping industrial and non-industrial users apart. Shoppers, office workers and pedestrians don’t necessarily mix well with industry. Industrial businesses are often loud, sometimes malodorous, and they start early and work late, which puts them at odds with offices, stores and residents. And Gering of the MIC points out an additional concern: Too much retail will overwhelm the capacity of roads used by industry, he says. The office-desk-size 60-liter engines retooled by B&G, for example, can generate 3,000 horsepower and require equally large vehicles for shipping. On First Avenue South just north of South Spokane Street, traffic from retail stores is already impeding truck access to VAE Nortrak’s plant and foundry, according to Gering. Trucks stuck in traffic raise a company’s operating costs, which means doing business in Seattle becomes more expensive.

Part of the purpose of zoning land for industrial use is to avoid such conflicts, says Kriss Sjoblom, who teaches urban economics at the University of Washington. Sjoblom opposed the new restrictions but also said that industrial users shouldn’t have to conform their operations to the needs of non-industrial neighbors. “You can let others move in so long as the ground rules don’t change. They came to the nuisance, and they don’t have any right to force their neighbor to change.”

One problem every side acknowledges is the city’s lack of a proper definition of what constitutes an industrial use. “If we really want to protect our industrial lands, we first need to define what they are,” Steinbrueck notes.

That may happen when the council takes the issue up again later this year. The council still faces second-tier decisions, says Councilwoman Sally Clark, who succeeded Steinbrueck as chair of the renamed Planning, Urban Development and Neighborhoods committee. “We made a first-tier decision, and sent a signal to the market that we’ve locked down this industrial land,” she says, “and we want to keep these industries.”

However, Clark does want to consider where to draw the boundaries of Seattle’s industrial land. “These are fairly significant swaths of property we’re talking about. It’s not a one-shot deal,” Clark says. She had proposed an amendment to the December legislation, to create retail areas along First and Fourth Avenues South in SoDo.

“A few of us were not able to carve those out at that time, but it is part of the conversation,” says Clark. She maintains this is different from the creeping gentrification that industrial businesses fear. Maintaining living-wage jobs has long been one of her priorities.

Where the rest of the new council will fall on these secondary issues is unclear. Industry and organized labor have lost their two most ardent supporters in Steinbrueck and David Della, who lost his re-election bid in November. Filling Steinbrueck’s vacant seat is Bruce Harrell, who has not expressed strong views on the issue one way or the other. The council’s other freshman, Tim Burgess, also has not taken a position.

 

Other council members are taking a cautious approach toward the issue of industrial zoning changes.

As a private citizen, Steinbrueck continues to be involved with the fight over Seattle’s industrial lands. He wants the city to create incentives for industry to remain in Seattle, including possibly increasing the density of manufacturing and industrial uses allowed under the current zoning. Sally Clark endorses this approach.

“If we can invest in South Lake Union for biotech, why can’t we invest for manufacturing and industry?” Steinbrueck asks.

Why not, indeed?

Since its founding, Seattle has been an industrial town—only recently morphing into a hub of the digital economy. The brightest future for Seattle may not be turning away from its past but finding a way to include both.

Amid the hydraulic whizzing and metal clanking of the B&G Machine shop, Bianchi succinctly summarizes the quandary. “What do we want Seattle to look like in 10 or 15 years?” he asks. “That’s how to look at the issue.”